Snapshot of the Utter Economic Mess that Is Putin’s Russia

 

RTSKFPT_putin-e1473433976781Over on Twitter, economist Ernie Tedeschi notes, “Russia’s economy has shrunk 5% in inflation-adjusted terms since 2013. America’s has grown 7.5%.” Yes, Putin’s authoritarian populism is proving to be, among other things, simply terrible economics.

This from the Index of Economic Freedom:

Russia’s prospects for long-term, diversified, sustainable economic growth remain bleak. There is no efficiently functioning legal framework, and government continues to interfere in the private sector through myriad state-owned enterprises. Corruption pervades the economy and continues to erode trust in the government. … Progress with market-oriented reforms has been uneven and often reversed at the urging of those with an interest in maintaining the status quo. Increasing inflationary pressure poses a major risk to overall macroeconomic stability. Large state-owned institutions have increased their domination of the financial sector at the expense of private domestic and foreign banks. …

Corruption is pervasive. Small elites control the bulk of the nation’s assets, and state institutions have been corroded. The main purpose of frequent anti-corruption campaigns is to ensure elite loyalty and hamper political opponents. The rule of law is not maintained uniformly across the country, and the judiciary is vulnerable to political pressure and inconsistent in applying the law. Protection of private property rights is weak. … Regulations remain burdensome. Bureaucratic obstacles and inconsistent enforcement of regulations make entrepreneurial decision-making very uncertain. The outmoded labor code continues to limit employment growth. The government uses extensive subsidies and numerous state-owned companies to influence domestic prices. … State-owned enterprises significantly distort Russia’s economy. State-owned financial institutions have further solidified their position by taking market share from domestic private banks and increasing their control of lending.

The index puts Russia right between Lesotho and Algeria. But hey, Russia does have a low, flat (!) personal income tax rate of 13% and a top corporate tax rate of just 20%. It’s a pro-growth, supply-side paradise — although one with a life expectancy of just 70.47 years. That’s #153 on the global league tables, by the way, a sweet spot just below Bangladesh and above North Korea (h/t to journalist Daniel Gross).

Published in Economics, Foreign Policy
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  1. Old Bathos Moderator
    Old Bathos
    @OldBathos

    Has Russia ever known a time when it was not all just a matter of despotism and raw use of power in their legal and economic culture?  Most of their Eastern European satellites had sufficient residual Western culture to rebuild from. I have no idea how you build a functioning legal culture from scratch in this day and age short of occupation by a benevolent power.

    • #1
  2. Doctor Robert Member
    Doctor Robert
    @DoctorRobert

    The two paragraphs from the Index of Economic Freedom EXACTLY describe where America is heading under Obama, where it will head even faster and with greater certainty under Hillary.  There is no difference in style, only in degree.

    • #2
  3. Viator Inactive
    Viator
    @Viator

    On the other hand Russia is in the midst of a “great awakening”, not unlike some American revivals.

    http://www.christiantoday.com/article/russian.orthodox.church.revival.under.putin.continues/78687.htm

    https://www.foreignaffairs.com/articles/russia-fsu/2013-09-17/russias-orthodox-awakening

    • #3
  4. Seawriter Contributor
    Seawriter
    @Seawriter

    The lesson of the 20th century was nations with free market economies and representative governments outperform those with those with command economies and authoritarian governments despite the alleged “efficiency” of the latter. Through three world wars and periods of peace this held true. And we are surprised that this is still true on the 21st century, exactly why?

    Seawriter

    • #4
  5. Oblomov Member
    Oblomov
    @Oblomov

    James Pethokoukis: Small elites control the bulk of the nation’s assets, and state institutions have been corroded. The main purpose of frequent anti-corruption campaigns is to ensure elite loyalty and hamper political opponents. The rule of law is not maintained uniformly across the country, and the judiciary is vulnerable to political pressure and inconsistent in applying the law. Protection of private property rights is weak. … Regulations remain burdensome. Bureaucratic obstacles and inconsistent enforcement of regulations make entrepreneurial decision-making very uncertain. The outmoded labor code continues to limit employment growth.

    Hmm… This is Russia we’re talking about, right? And not the United States. Just checking.

    • #5
  6. big spaniel Member
    big spaniel
    @bigspaniel

    Viator:On the other hand Russia is in the midst of a “great awakening”, not unlike some American revivals.

    http://www.christiantoday.com/article/russian.orthodox.church.revival.under.putin.continues/78687.htm

    https://www.foreignaffairs.com/articles/russia-fsu/2013-09-17/russias-orthodox-awakening

    Maybe the Russian Orthodox Church as an institution is thriving under Putin, but that does not necessarily translate to a moral awakening among Russians or an increase in support of the people.  While most all Russians are at least nominally Orthodox, that doesn’t mean that they are religious.  The religiousness of the Russian people has probably been overstated.  The ROC is heavily funded by the elite in Russia.  This is why the Ukraine conflict is so important to the Russian Orthodox Church; a disproportionate number of parishes and clergy come from Ukraine, under the Russian Orthodox Church – Moscow Patriarchate.  In Ukraine itself, since the Russian aggression against Crimea and the Donbass, the ROC-MP has been slowly losing influence and support to the Kyiv Patriarchate, which is more identified with the Ukrainian nation.  Clergy of the Moscow Patriarchate refuse to preside at funerals of Ukrainian soldiers killed in the fighting.

    Spiritual revivals come from below, not above.  An authentic spiritual revival in Russia, either within or outside the approved Church, would probably be repressed.

    • #6
  7. Underground Conservative Coolidge
    Underground Conservative
    @UndergroundConservative

    To uphold what big spaniel stated, their orthodoxy is quite chauvinistic. Don’t get too excited. It may rub off on more people the right way than in Soviet days, but it is becoming a larger and larger tool for nationalism.

    • #7
  8. Viator Inactive
    Viator
    @Viator

    big spaniel: Maybe the Russian Orthodox Church as an institution is thriving under Putin, but that does not necessarily translate to a moral awakening among Russians or an increase in support of the people.

    You mean no one is attending those 34,764 churches? You mean they are building 1,000 churches a year so they can stand empty? That’s very Keynesian of them.

    • #8
  9. Viator Inactive
    Viator
    @Viator

    big spaniel: The ROC is heavily funded by the elite in Russia.

    Not according to this article.

    “Churches in Russia generate their basic income from the sale of candles, but also earn revenues from donations for the performance of religious rites. Candles for the Russian Orthodox Church are molded in dozens of workshops, using as raw materials not only new wax or paraffin, but also used candle ends. The cost of the production of a candle is dozens of times lower than the price it is sold for in the church. The monthly revenues of churches range between $70 and $40,500. Part of the money (10-15 percent) made by churches (there are about 34,000 of them) is passed to dioceses, of which there are about 300 in Russia. Dioceses, in turn, transfer 15 per cent of these contributions to the Patriarchate.”

    “In 2012-2015, the Russian Orthodox Church and its associated structures received 14 billion rubles ($189.2 million) from the state. A total of 2.6 billion rubles ($35.1 million) is budgeted for the Russian Orthodox Church for 2016.”

    http://rbth.com/business/2016/03/09/where-does-the-russian-orthodox-church-get-its-money-from_574079

    • #9
  10. Hang On Member
    Hang On
    @HangOn

    Russia is heavily dependent on oil and oil prices. Oil prices have done exactly what since 2013? And they are only down 5%. That seems far more plausible explanation than the rubbish you are peddling.

    Where is China in the list? What is China’s economic performance?

    • #10
  11. big spaniel Member
    big spaniel
    @bigspaniel

    Viator:

    big spaniel: The ROC is heavily funded by the elite in Russia.

    Not according to this article.

    “Churches in Russia generate their basic income from the sale of candles, but also earn revenues from donations for the performance of religious rites. Candles for the Russian Orthodox Church are molded in dozens of workshops, using as raw materials not only new wax or paraffin, but also used candle ends. The cost of the production of a candle is dozens of times lower than the price it is sold for in the church. The monthly revenues of churches range between $70 and $40,500. Part of the money (10-15 percent) made by churches (there are about 34,000 of them) is passed to dioceses, of which there are about 300 in Russia. Dioceses, in turn, transfer 15 per cent of these contributions to the Patriarchate.”

    “In 2012-2015, the Russian Orthodox Church and its associated structures received 14 billion rubles ($189.2 million) from the state. A total of 2.6 billion rubles ($35.1 million) is budgeted for the Russian Orthodox Church for 2016.”

    http://rbth.com/business/2016/03/09/where-does-the-russian-orthodox-church-get-its-money-from_574079

    The ROC was also big in the mineral water business back in the 90s, among other business ventures.

    Like everything else in Russia, most anything financial is going to be off-the-books.  So I wouldn’t put too much credence in official budget statistics.

    • #11
  12. big spaniel Member
    big spaniel
    @bigspaniel

    Viator:

    big spaniel: Maybe the Russian Orthodox Church as an institution is thriving under Putin, but that does not necessarily translate to a moral awakening among Russians or an increase in support of the people.

    You mean no one is attending those 34,764 churches? You mean they are building 1,000 churches a year so they can stand empty? That’s very Keynesian of them.

    I’m not doubting the sincerity of the faithful.  Most people identify themselves as believers.  But church attendance in Russia isn’t all that high.  Orthodox Christians are more likely to stop by a church for a moment as oppose to attending a Sunday service.  And some churches are built as vanity projects, a practice common among many faiths, Christian and otherwise.

    • #12
  13. Unsk Member
    Unsk
    @Unsk

    “:The two paragraphs from the Index of Economic Freedom EXACTLY describe where America is heading under Obama, where it will head even faster and with greater certainty under Hillary. There is no difference in style, only in degree.”

    Unfortunately you can add the Trumpster to that line of Leftist clowns.

    Corrupt -Check

    Loves Cronyism- Check

    Willing to limit Freedom-Check

    Willing to interfere in the economy-check.

    Favors Big Government Control- Check

    Big Friend of Putin- check

    Heavily beholden  and involved with the Russian Mob Oligarchs- Check

    In fact to the Donald imitating the Russian economy is probably where  he wants to go. Boy,  that Putin is a great leader! At least so says the Donald.

    • #13
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